After the bell on Wednesday, Qualcomm released its third-quarter profits, which marginally exceeded Wall Street predictions, but its guidance for the current quarter fell short of expectations.
Over 4% of Qualcomm’s stock fell during extended trading.
According to Refinitiv consensus expectations, Qualcomm performed as follows:
- Adjusted EPS of $2.96 beat expectations of $2.87 and increased by 53% year over year.
- Adjusted revenue of $10.93 billion above the $10.88 billion consensus estimate and increased by 37% year over year.
In contrast to Wall Street’s projections of $3.23 per share and $11.87 billion in sales for the fourth quarter, Qualcomm stated that it projected between $3 and $3.30 in earnings per share on between $11 billion and $11.8 billion in sales.
The company’s results were solid despite operating in a “challenging macroeconomic environment,” according to Qualcomm CEO Cristiano Amon. Sales at Qualcomm increased by 37% throughout the quarter.
Sales of CPUs and modems for mobile devices make up the majority of Qualcomm’s revenue. Despite indications that smartphone sales may already be slowing down as a result of macroeconomic factors like inflation, the company’s handset business climbed 59 percent annually during the quarter to $6.15 billion.
However, according to Qualcomm’s prediction, the company’s handset sales growth would decelerate during its fiscal fourth quarter, highlighting the possibility that a fall in the market for smartphones might negatively impact its primary business in terms of both revenue and earnings. The company anticipates a sequential increase in operating expenses of between 6 and 8 percent throughout the quarter.
The company’s anticipated fourth-quarter decline in smartphone processor sales, according to Qualcomm CFO Akash Palkhiwala, would be in the middle and lower tiers as opposed to chips for the most costly phones.
Due to more expensive chips, Qualcomm said it is still on track for its handset business to expand just below 50% this year.
Along with the other semiconductors Qualcomm offers, such as RF front ends, processors for automobiles, and low-power chips for connected devices, handsets are listed under a unit named QCT. On an annual basis, that sector increased by 45% to $9.38 billion. Despite Qualcomm’s recent efforts to diversify into other types of chips, the segment’s fastest growing revenue was in the handset market.
Qualcomm and Samsung have agreed to a cooperation that will last through 2030 and will involve the licencing of patents and the provision of Snapdragon mobile CPUs. On a per-unit basis, Samsung is the top smartphone maker in the world.
Automotive chips saw an all-time high for Qualcomm of $350 million in yearly growth, indicating that it is still a modest company in comparison to Qualcomm’s other product categories. The Internet of Things division of Qualcomm, which creates low-power semiconductors for networked devices, increased by 31% to $1.83 billion.
Sales of over $1.52 billion were recorded by QTL, Qualcomm’s other significant business segment that handles licencing fees for the company’s 5G and other technologies, representing a 2% yearly increase. Although it hasn’t been increasing much lately, it still contributes significantly to the chipmaker’s profits.
As chip prices rise as a result of shortages and problems with Chinese production, the company’s gross margin fell short of projections. Qualcomm contracts with foundries that are fully booked as a result of the epidemic to produce its chips. Compared to the average forecast of 57.8 percent, Qualcomm’s gross margin was reported at 56 percent.
A total of $1.3 billion, including $842 million in dividends, was reported as spending by Qualcomm on shareholder return during the quarter.